Thursday, July 29, 2010

Southern District Certifies Newspaper Carrier Misclassification Suit: Dalton v. Lee Publ'ns, Inc

On July 27, 2010, Southern District Court judge, Barry Ted Moskowitz, entered an order in Dalton v. Lee Publ'ns, Inc, 2010 U.S. Dist. LEXIS 75132 (S.D. Cal. July 27, 2010), granting certification of a class of newspaper carriers. As set forth within the Court’s order, plaintiffs alleged various wage violations based on the theory that defendant had uniformly misclassified news carriers as independent contractors. The Court’s decision to certify turned in large part on the element of “control” being subject to common proof through form contracts utilized by the defendant:
The primary factor, the right to control, is also susceptible to common proof. This is because the rights and obligations of the class members and Defendant are set forth in two sets of substantially identical contracts. The contracts set forth the following: (a) the carrier's primary duties, including assembling and delivering the newspapers timely and in good condition; (b) the carrier's obligation to supply a vehicle and equipment; (c) the carrier's pay schedule; (d) the purported understanding of the parties regarding the carrier's independent contractor status; (e) the penalties for excessive complaints, misdeliveries, and subscription cancellations; (f) the requirement to get auto insurance in specific liability amounts; (g) which party bears the risk of loss from non-payment, non-delivery, and other liabilities; (h) the contract is unassignable, but the carrier may hire substitutes or helpers; (i) the carrier will not attend employee meetings and is free to ignore all suggestions offered by the Defendant; (j) the manner and rate of compensation; (k) the carrier must use his or her best effort to increase circulation; (I) the parties must exchange updated information regarding subscriber cancellations and enrollments; (m) the duration of the contract; and (n) termination rights, among other things. There is no evidence before the Court that the parties' rights and obligations were substantially different from those set forth in the contracts.
Thus, the contracts sets forth the contours of Defendant's control over the class. The Court makes no findings yet about the extent of Defendant's control, but only observes that the contracts provide a basis to do so.
See Dalton, 2010 U.S. Dist. LEXIS 75132, 19-21.

The Court’s opinion is quite detailed, as it appears that the defendant pulled out all the stops in its attempt to defeat certification. One of the more interesting arguments raised was that class members would be unable to establish liability by overcoming the independent contractor defense alone, but rather, would have to overcome a second-level “outside sales” exemption defense.  The Court reasoned that this defense was implausible on its face, but in any event, would not create individualized issues sufficient to overcome certification:
Lastly, Defendant argues that its outside-salesperson defense will require individualized analysis. Under California regulations, an outside salesperson is defined as someone "who customarily and regularly works more than half the working time away from the employer's place of business selling tangible or intangible items or obtaining orders or contracts for products, services, or use of facilities." Vinole v. Countrywide Home Loans, Inc., 571 F.3d 935, 938 (9th Cir. 2009) (citing California Industrial Wage Commission Wage Order 4-2001, § 2(M)). The claim that home-delivery newspaper carriers are salesman is dubious on its face. They deliver newspapers; they generally do not sell them. Moreover, because of Defendant's estimates and records--including Plaintiffs' time spent folding newspapers, whether they used Defendant's facilities to do so, and Plaintiff's time spent delivering newspapers--one could easily calculate whether a particular Plaintiff spent "more than half the working time away from the employer's place of business." Vinole, 571 F.3d at 938. So even if the carriers could be considered salespeople, determining where they spent their time would not entail so much individual analysis as to defeat certification.
See Dalton, 2010 U.S. Dist. LEXIS 75132, 26-27

The Court’s opinion covers many issues, too many to discuss in detail. Definitely a must read.

Friday, July 23, 2010

District Court Grants Plaintiffs Summary Judgment On Vacation and Wage Statement Claims: Lopez v. G.A.T. Airline Ground Support, Inc.

On July 19, 2010, Southern District Judge Irma E. Gonzalez, issued an order granting (in part) a plaintiff-side motion for summary judgment of various wage claims in Lopez v. G.A.T. Airline Ground Support, Inc., 2010 U.S. Dist. LEXIS 73029 (S.D. Cal. July 19, 2010). In my opinion, the Court’s discussion regarding the plaintiffs’ vacation pay and wage statement claims are noteworthy.

With regard to plaintiffs’ vacation pay claim, the Court held that the following policy contained in the defendant’s employee handbook violated Labor Code § 227.3 as a matter of law: “Upon completion of one year of continuous employment, hourly employees will receive 5 days of paid vacation. Employees will continue to receive 5 days of paid vacation annually on their Anniversary Date.” See Lopez, 2010 U.S. Dist. LEXIS 73029, at 10. Plaintiff claimed that this policy required employees to forfeit vested vacation pay if they are not employed on the one-year anniversary of their start date, in violation of Section 227.3. See id. Conversely, the defendant claimed that the policy merely conditioned an employee’s right to vacation on satisfying a “probationary period”, a practice which the defendant claimed was deemed lawful in Owen v. Macy's, Inc., 175 Cal. App. 4th 462 (2009).

The Court sided with plaintiffs, reasoning that defendant’s policy was distinguishable from Owen because it did not condition the “accrual” of vacation rights on satisfying the one year probationary period:
GAT's policy is distinguishable from the one in Owen. The policy in Owen expressly stated that employees did not "earn and vest in paid vacation" for the first six months of employment. [] Then, after the first six months, the employees in Owen received vacation days as an advance for the coming year, on the assumption that the employees would remain with the company during the coming year. Here, GAT's policy does not specify that no vacation is earned or vested during the first year, only that employees do not "receive" the five vacation days until their one-year anniversary. Also, unlike the policy in Owen, the vacation GAT employees receive on their first-year anniversary is not an "advance" for vacation earned during the second year of employment. Douglas Gray, a GAT payroll manager, testified employees receive five days of vacation after one year, and then accrue vacation time on a pro-rata basis going into their second year of employment (and continuing onward). [] Therefore, GAT's vacation policy requires employees to forfeit vested vacation pay in violation of Section 227.3.
See Lopez, 2010 U.S. Dist. LEXIS 73029, 11-12.

The Court also granted summary judgment in favor of plaintiffs with regard to their Section 226 wage statement claims. There, the Court concluded that the defendant’s failure to include the applicable hourly rate of pay for regular and overtime hours required plaintiffs to do complex mathematical calculations to determine the accuracy of their paychecks, and thereon, violated Section 226(a) as a matter of law:
It is undisputed that GAT's paychecks do not indicate the applicable hourly rate of pay for the employee's regular rate, overtime rate, or double-time rate of pay. Plaintiffs' paychecks included only the total number of hours worked and the total amount paid. Therefore, Plaintiffs had to perform mathematical calculations to determine if their paychecks were accurate. Cicairos v. Summit Logistics, Inc., 133 Cal. App. 4th 949, 35 Cal. Rptr. 3d 243, 247 (Ct. App. 2005) ("If it is left to the employee to add up the daily hours shown on the time cards or other records so that the employee must perform arithmetic computations to determine the total hours worked during the pay period, the requirements of section 226 would not be met."). The failure to provide this information violates Section 226(a).
It is also undisputed that GAT's wage statements indicate only the end date for each pay period, and do not list the beginning date. Defendants argue the pay period was sufficiently identified on the paychecks, because the paychecks provide the pay period when reviewed sequentially. However, the Labor Code requires each wage statement to provide "the inclusive dates of the period." See Cal. Labor Code. § 226(a).
Therefore, Plaintiff is entitled to summary judgment on the issue of whether Defendants furnished accurate itemized wage statements. Defendants violated Labor Code § 226(a) by failing to include the inclusive dates of the period for which employees were paid, the applicable hourly rates, and the corresponding number of hours worked at each hourly rate.
See Lopez, 2010 U.S. Dist. LEXIS 73029, 18-19.

Tuesday, July 20, 2010

Second District Publishes Section 226 “Wage Statement” Opinion: Morgan v. United Retail

On July 19, 2010, the Second District (Division 7) issued an order (pursuant to requests filed by Starbucks Corporation and Ralph's Grocery Company) changing the publication status of Morgan v. United Retail, __ Cal.App.4th __ (2010) from unpublished to published.  The Court’s opinion concludes that the Labor Code Section 226(a) requirement of providing the “total hours” worked in employee wage statements is met where the employer provides an accurate statement of both regular and overtime hours that were worked within a pay period. Slip Opinion, at 15 (“United Retail's wage statements complied with section 226's requirement regarding the total hours worked by showing the actual number of regular hours worked and the actual number of overtime hours worked during the applicable pay period.”).

Wednesday, July 14, 2010

California Supreme Court Holds that Prop 64 Standing Cannot Be Negated by the Defense of Mitigation: Clayworth v. Pfizer

On July 12, 2010, the California Supreme Court issued its opinion in Clayworth v. Pfizer, __ Cal.4th __ (2010), concluding, among other things, that Prop 64 standing cannot be eliminated based on a plaintiff’s ability to mitigate the harm suffered. At issue were UCL claims brought by pharmacies predicated on alleged price fixing by a collective of drug manufacturers. The dismissal of such claims was subsequently upheld by the Court of Appeal on the grounds that the alleged “overcharging” injury was mitigated completely by pharmacies passing the increased drug costs to third parties (i.e. the consumer and third party payers), thereby eliminating completely the plaintiff’s standing and entitlement to a remedy under the UCL.

The Supreme Court reversed. As reasoned by the Court, the argument put forward by defendant manufacturers conflated the issue of plaintiffs' standing with the plaintiffs' ultimate entitlement to a remedy under the UCL, of which only the later was arguably subject to a defense based on “mitigation”:
While Manufacturers argue that ultimately Pharmacies suffered no compensable loss because they were able to mitigate fully any injury by passing on the overcharges, this argument conflates the issue of standing with the issue of the remedies to which a party may be entitled. That a party may ultimately be unable to prove a right to damages (or, here, restitution) does not demonstrate that it lacks standing to argue for its entitlement to them. (See Southern Pac. Co. v. Darnell-Taenzer Co., supra, 245 U.S. at p. 534 ["The plaintiffs suffered losses . . . when they [over]paid. Their claim accrued at once in the theory of the law and it does not inquire into later events."]; Adams v. Mills, supra, 286 U.S. at p. 407 ["In contemplation of law the claim for damages arose at the time the extra charge was paid," notwithstanding any subsequent reimbursement].) The doctrine of mitigation, where it applies, is a limitation on liability for damages, not a basis for extinguishing standing. (See Pool v. City of Oakland (1986) 42 Cal.3d 1051, 1066 [" 'The rule of [mitigation of damages] comes into play after a legal wrong has occurred, but while some damages may still be averted' " (quoting Prosser & Keeton, Torts (5th ed. 1984) § 65, p. 458)].) This is so because mitigation, while it might diminish a party's recovery, does not diminish the party's interest in proving it is entitled to recovery.
Slip Opinion, at 39-40.

Moreover, the Court further concluded that a defense based on “mitigation” was incapable of eliminating plaintiffs' right to pursue injunctive relief. As reasoned by the Court, the lower court's analysis impermissibly linked the plaintiff’s right to an injunctive remedy to the plaintiff also establishing an entitlement to restitution:
The Court of Appeal held Pharmacies were barred from seeking injunctive relief because, it concluded, they had suffered no monetary loss. To the extent this holding rests on the conclusion Pharmacies lacked standing under section 17204, it is erroneous; as discussed ante, Pharmacies have standing. To the extent the holding rests on the conclusion that even if Pharmacies had standing, they could not seek injunctive relief unless they could also seek restitution, it similarly is erroneous. Section 17203 makes injunctive relief "the primary form of relief available under the UCL," while restitution is merely "ancillary." (In re Tobacco II Cases (2009) 46 Cal.4th 298, 319.) Nothing in the statute's language conditions a court's authority to order injunctive relief on the need in a given case to also order restitution. Accordingly, the right to seek injunctive relief under section 17203 is not dependent on the right to seek restitution; the two are wholly independent remedies. (See ABC Internat. Traders, Inc. v. Matsushita Electric Corp. (1997) 14 Cal.4th 1247, 1268 [§ 17203 "contains . . . no language of condition linking injunctive and restitutionary relief"]; Prata v. Superior Court (2001) 91 Cal.App.4th 1128, 1139 [plaintiff could pursue injunctive relief even though restitution was unavailable].)
Slip Opinion, at 41.

Thursday, July 8, 2010

Two PAGA Decisions of Note: Mendez v. Tween Brands and Nordstrom Commission Cases

On June 30, 2010, Eastern District Judge Morrison C. England, Jr. issued an opinion in Mendez v. Tween Brands, 2010 U.S. Dist. LEXIS 66454 (E.D. Cal. June 30, 2010), concluding that a PAGA representative claim need not be certified as a class action in Federal Court. Defendants sought to strike the plaintiff’s PAGA claims, which were pled in a representative capacity, on the grounds that PAGA claims are procedural in nature, and under Erie, needed to be certified under Rule 23. See Mendez, 2010 U.S. Dist. LEXIS 66454, at 6-7.  Based on this argument, the defendants maintained that litigation of PAGA claims were governed by Federal Rules of Procedure, rendering inapplicable the California Supreme Court’s decision in Arias v. Superior Court, 46 Cal. 4th 969 (2009) that PAGA claims need not satisfy class action requirements.

The Court Disagreed. In addition to reasoning that such a result would encourage forum shopping by employers [Id, at 10], the Court reasoned that the defendant’s argument was based on the misperception that PAGA claims vest employees with an entitlement to PAGA penalties, rather than implicating a purely “law enforcement” action that is conducted on behalf of the State:
Defendants fundamentally misstate the nature of PAGA claims. PAGA claims are law enforcement actions, not class actions. A plaintiff brings claims pursuant to PAGA as "the proxy or agent of the state's labor law enforcement agencies." Arias, 209 P.3d at 933. n4 The remedy sought in a PAGA suit consists of civil penalties, not individual or class damages. Cal. Lab. Code § 2699(a). "[A PAGA] action is fundamentally a law enforcement action designed to protect the public and penalize the employer for past illegal conduct. Restitution is not the primary object of a PAGA action, as it is in most class actions." Franco v. Athens Disposal Co., Inc., 171 Cal. App. 4th 1277, 1300 (2009). Defendant relies on the Supreme Court's ruling in Shady Grove that Rule 23 governs all class actions brought in federal court, Shady Grove Orthopedic Assocs. v. Allstate Ins. Co., 130 S. Ct. 1431 (2010), but PAGA claims, by definition, are not class actions. This renders Defendant's argument moot.
See Mendez, 2010 U.S. Dist. LEXIS 66454, at 10-11.

In a second PAGA related decision, on July 7, 2010, the Fourth District (Division 3) published its decision in Nordstrom Commission Cases, __ Cal.App.4th __ (2010) upholding final approval of a class action settlement which expressly allocated "nothing" to PAGA claims. It is important to note that the Court’s decision does not ratify a wholesale abandonment of PAGA claims to facilitate a wage settlement, but rather, approved an allocation of "nothing" based on a very narrow set of circumstances.

First, the Court’s decision appears to ratify the release of PAGA claims which were actually pled by employee. As noted by the Nordstrom Court, “PAGA ... allows aggrieved employees to bring civil actions to recover already existing penalties if the Labor and Workforce Development Agency, which is authorized to recover such penalties, does not do so.” Slip Opinion, at 13. Indeed, under Labor Code § 2699.3 an employee has no standing to pursue a PAGA claim unless and until (1) written notice is provided to the Labor and Workforce Development Agency and (2) the Agency indicates that it does not intend to pursue the claim. (Thus, contrary to the efforts of some defense counsel, a broad releases of PAGA claims may not be achieved as part and parcel of a wage and hour settlement absent an employee's prior satisfaction of the requirements of Section 2699.3). Here, PAGA claims were apparently before the Court, as the the Nordstrom Court noted that “the PAGA penalty claims were at issue, and were resolved as a part of the overall settlement of the case.” See Slip Opinion, at 15.

Second, the Nordstrom Court’s approval of the allocation of nothing to plaintiff’s PAGA claims was based on the trial court’s determination that the record reflected that the PAGA claims were arguably not viable, and thereon, worth nothing. Specifically, the Court concluded that Nordstrom was acting under a consent judgment that was the product of a prior class action settlement, and as such, there was a good faith dispute as to whether Nordstrom engaged in any PAGA violation:
The Nordstrom Commission Cases settlement agreement identifies liability for PAGA penalties as a claim against Nordstrom and includes the following language: “The Parties allocate $0 to any Private Attorneys General Act penalty claim under Labor Code § 2699 et seq., for penalty claims based on the Released Claims. During the Class Period, Nordstrom paid Putative Class Members’ commissions pursuant to a commission plan that it contends was approved by the United States District Court in Rios, and consequently, Nordstrom contends no claim for penalties of any nature is valid.” Thus, the PAGA penalty claims were at issue, and were resolved as a part of the overall settlement of the case. We find no abuse of discretion in the trial court’s approval of the settlement agreement containing these terms.
Slip Opinion, at 14-15.

Thus, Nordstrom does not appear to stand for the proposition that a plaintiff may simply settle out PAGA claims for nothing without a justification that would warrant doing so.

Tuesday, July 6, 2010

Second District Further Clarifies Class Settlement Approval Standards: Munoz v. BCI Coca-Cola Bottling Company Of Los Angeles

On July 2, 2010, the Second District (Division 8) changed the status of its class settlement opinion in Munoz v. BCI Coca-Cola Bottling Company Of Los Angeles, __ Cal.App.4th __ (2010) from unpublished to published. The Munoz appeal was initiated and prosecuted by a class member who objected to the grant of final approval based on a record he argued was insufficient to determine whether the settlement terms were fair, adequate and reasonable.

The Court’s opinion resolves any ambiguity as to whether the decisions in Kullar v. Foot Locker Retail, Inc., 168 Cal.App.4th 116 (2008) and Clark v. American Residential Services LLC, 175 Cal.App.4th 785 (2009) require an affirmative evidentiary showing capable of determining the maximum amount that is placed in controversy by class member claims to substantiate the fairness of a proposed settlement. As held by the Court, they do not, but rather require only a record capable of affording a more lose “understanding” of the amount in controversy sufficient to demonstrate realistic ranges in potential outcomes in the action:
Greenwell misunderstands Kullar, apparently interpreting it to require the record in all cases to contain evidence in the form of an explicit statement of the maximum amount the plaintiff class could recover if it prevailed on all its claims--a number which appears nowhere in the record of this case. But Kullar does not, as Greenwell claims, require any such explicit statement of value; it requires a record which allows “an understanding of the amount that is in controversy and the realistic range of outcomes of the litigation.” (Kullar, supra, 168 Cal.App.4th at p. 120.) That record exists in this case.
Slip Opinion, at 11.

Moreover, the Court rejected the view that class counsel must affirmatively prove that sufficient discovery/investigation was conducted to evaluate the strength of class member claims, concluding that “[t]he salient point is whether the factual record before the court is sufficiently developed to allow the court independently to satisfy itself ‘that the consideration being received for the release of the class members’ claims is reasonable in light of the strengths and weaknesses of the claims and the risks of the particular litigation.’” See id., at 12-13. Importantly, while the Court does not proscribe a set amount of information required for a trial court to fulfill its duties in this regard, or a set form which such information is to be submitted, the Court was clear that the underlying record must be something more than “nothing” that would enable the trial court to evaluate the strengths and weaknesses of the claims at issue:
As a final observation on this topic, we note that the evidentiary records in Kullar and Clark, upon which Greenwell relies so heavily, are significantly different from this case. In Kullar (which did not involve the misclassification of exempt employees), there was no discovery at all on meal period claims that were added in an amended complaint and were the focal point of the objections to the settlement. (Kullar, supra, 168 Cal.App.4th at pp. 121-122.) While Kullar class counsel argued that the relevant information had been exchanged informally and during mediation (id. at p. 126), nothing was presented to the court--no discovery, no declarations, no time records, no payroll data, nothing (id. at pp. 128-129, 132)--to allow the court to evaluate the claim. And in Clark, the problem was that the trial court was not given sufficient information on a core legal issue affecting the strength of the plaintiffs’ case on the merits, and therefore could not assess the reasonableness of the settlement terms. (Clark, supra, 175 Cal.App.4th at p. 798.) The record in this case contains neither of the flaws that doomed the Kullar and Clark settlements.
Slip Opinion, at 13.

In light of the standard articulated by the Court, the showing on both points would not require submission of a fully developed evidentiary record, but rather, could be satisfied in class counsel’s supporting declaration by laying out the foundational facts and issues on which the compromise of class member claims is based.

Thursday, July 1, 2010

District Court’s Denial of Reconsideration Motion Counsels Duty to Promptly Alert Court of New Authority: Keilholtz v. Lennox Hearth Prods

On June 4, 2010, Northern District Judge Claudia Wilken denied a motion requesting reconsideration of the Court’s previous order certifying National and California classes on behalf of single-pane sealed glass front fireplaces owners, previously discussed here. As reasoned by the Court, the defendant’s reconsideration motion, which was based on new Ninth Circuit authority, failed to meet the requirements of Local Rule 7-9 insofar as the opinion was actually issued prior to the Court’s certification order:
Although the parties cannot be faulted for not knowing the precise date the Court will file its orders, they should bring to the Court's attention as soon as possible any facts or law that may affect the motion. Because Defendants waited until after the Court filed its order granting Plaintiff's motion for class certification to notify it of a decision published before the filing of the order, Defendants' motion for leave to file a motion for reconsideration does not fall under any of the three categories described above.
See Keilholtz, 2010 U.S. Dist. LEXIS 63917, 3.

The decision is one of note for class counsel, who in some cases can face multiple motions for reconsideration of a certification order wherein it is claimed everything under the sun constitutes “new authority” impacting the court’s opinion.

New Wage Class Certification Opinion: Faulkinbury v. Boyd & Associates, Inc.

On June 24, 2010, the Fourth District (Division Three) in Faulkinbury v. Boyd & Associates, Inc., __ Cal.App.4th __ (2010) upheld a trial court order denying certification of meal and rest period claims. As reflected in the Court’s opinion, the underlying record was deemed distinguishable from that at issue in Bufil v. Dollar Financial Group, Inc., 162 Cal. App. 4th 1193, 1203 (2008), and the Second District’s recent decision in Jaimez v. Daiohs USA, Inc., 181 Cal.App.4th 1286 (2010), as individualized issues would predominate adjudicating defendant’s liability under the class proposed. From the discussion contained in the opinion, the ultimate failure of certification appears to center on a failure to tightly focus the class definition at the certification stage to the specific uniform facts and theories exposed. Slip Opinion, at __ (“in contrast to Bufil, Plaintiffs structured the case in a way that defines the Meal Break Class very broadly to include all Boyd security guard employees in the class period.”). In this regard, the opinion really presents little new, but in fact, mirrors the factual/procedural underpinnings of Bufil itself, wherein certification was also initially denied on the first go-round for this very reason. In my view, the  opinion really underscores the importance of critically examining and tightening your certification theory and class definion prior to certification.  In fact, following Bufil as a guide, I think some variant of this proposed class could still be certified utilizing a more narrowly framed definition and corresponding legal theory.